Here is my response to recent blogs on the status of Toronto’s and more broadly, Canada’s Startup Ecosystem. Specifically, posts by Upverter's Founder Zac Hamouth, and startup community member, commentator, and marketing expert Mark Evans. Zac’s post, “Toronto is Broken" argues we are missing or have significant weakness in key elements for a successful startup ecosystem. Mark on the other hand, argues that Toronto is working with solid foundations with a strong trajectory in his post "No, Toronto’s Startups Ecosystem isn’t broken”. Both articles nail some facts, highlight misconceptions, and feed an important debate.
My job is to foster this Ecosystem, so I feel compelled to add a third view to the exchange. For context, I run South West Ontario from Toronto for Ottawa based Coral CEA; we are a private NFP funded by the Ontario Ministry for Economic Development & Innovation (MEDI). MEDI provides mandate and funding to Ontario Network of Excellence (ONE) that is tasked with supporting innovation & entrepreneurship in Ontario; its key Members include MaRS, Communitech, and NAO. I have been active in the Toronto Startup Community for the last 4 years, as an entrepreneur (1 bust), service provider (refer to bust & Coral), and funder (Coral). Coral CEA is working across the board on ecosystem development, it’s part of our mandate from MEDI, it’s the directive of the Grants we provide, and it’s the product we are developing as a startup (a post onto itself).
I think I might have a novel view on this debate given my rather unique role. I find that two party debates generally polarize pretty quickly into partisan positions, and I think we should avoid that in our community, in the middle lays much firmer ground for progress.
Let’s start with an attempt at inventorying the perspectives presented in each argument.
- The pool of local proven players (millions in shareholder value created) is shallow (Zac); but there is a group world class players here (RIM, Nortel, Workbrain, Radian6, Hootsuite, Rypple, etc.) (Mark).
- Big ideas are evident in our market as Mark points out, I see the small ideas that Zac worries about, but small and bad lead to big and beautiful its part of a healthy environment.
- The Scale Gap. I agree this is a big challenge, the evidence shows this is a weakness. Canada has not produced a sustaining high tech innovation company at Scale. RIM, Cognos, Nortel have scaled but not sustained. While this gap persists, founders will exit before establishing anchor companies (Dayforce). NexJ, Fixmo, Shopify look like they are taking shots at this.
- Mentorship is similar to the pool of proven talent, there is a small group of true experts providing tonnes of value to the community, Mike McDerment, Dan Debow, Rick Segal, Mark Ruddock, Howard Gwinn, etc. They are supplemented by a deep pool of support organizations & people who fill important roles, the ONE contains lots of this, law & accounting firms make solid efforts, as do community organizers like David Crow, Phil Telio, & Mark Evans. This can be bigger and better, but that will happen when more companies break through.
- The Capital scene has been a struggle for a while, but that has significantly changed this year with a group of new funds launched (OMERS, RHO, Celtic, etc.) with more on the way (Round13), and the government more than pulling its weight ($400m VC backing, SRED, Grants like Venture Start, Coral, etc.). I also see the Angel networks getting better orientated to their value potential to the startup market. Could this be more aggressive, yes, will good deals get funded, no question, yes.
So, given the presentation of ideas and facts from both sides I see where both are coming from, we have strengths and we have areas that need work for us to get to the next level. The two main challenges Zac points to, talent that knows how to scale to compete globally, and build a stronger Founder peer group I think are spot on and will lead to his third, bigger ideas. These two things will need to leverage the strengths Mark points to and add multiples of value to those existing assets that make us all bullish on our ecosystem.
As capital is deployed, teams scale, and exit over the next 3 – 5 years the opportunity to create a sustainable tech startup ecosystem will present its self. We will need to see a minimum of 20-30 companies raise $10m+ &/or generate $100m+ valuations in this decade (2010-20) to feed the knowledge, talent and capital pool needed to get a healthy ecosystem. All hands on deck ready to accept and face the brutal fact that there are icebergs everywhere and this ship can sink.